Deposit Stuck in a Brokerage Trust Account in Ontario: After Two Years?

Your deal fell through, and the deposit is still sitting with the brokerage. Neither side may be willing to sign off on who gets it. Weeks or months can pass, and it is fair to wonder what happens if nothing changes.

This article explains how brokerages must hold deposits in Ontario, how a deposit is released after a failed deal, and what happens to money that nobody claims. It is general information, not advice on your own situation.

How a brokerage must hold your deposit

Under the Trust in Real Estate Services Act, 2002, s. 27(1), every brokerage must keep a trust account in Ontario. It must deposit all money it holds in trust for others into that account, keep that money separate from its own, and pay it out only according to the terms of the trust.

A deposit received by the brokerage that is to hold it under the Agreement must be put into that brokerage's real estate trust account within five business days of receipt. The exact regulation section behind that timing is worth confirming with a lawyer if it matters in your case.

Getting the deposit released after a failed deal

When a deal fails, the brokerage should release the deposit only under a release or direction signed by all parties to the Agreement, or under a court direction. The brokerage cannot simply pick a side.

That is why disputes can leave a deposit in place for a long time. If the buyer and seller cannot agree, a court direction may be the route, and a lawyer can explain whether that makes sense for you.

RECO's consumer deposit insurance covers deposits held in a brokerage's real estate trust account against events such as brokerage theft, fraud, insolvency or misappropriation. It pays up to $200,000 per claim and up to $4 million for all claims arising from a single event, at no cost to consumers. It does not apply where a deal has failed and the buyer and seller simply cannot agree on who gets the deposit.

When a deposit becomes unclaimed

Trust money that goes unclaimed in a brokerage trust account for more than two years must be paid to RECO. This includes money where it is unclear who is entitled to it.

So a stalled deposit is not held forever. If the parties neither sign a release nor get a court direction, the money can eventually fall into this category.

• Before paying the money over, the brokerage must make reasonable efforts to find the person entitled.
• A brokerage does not have to send RECO unclaimed trust money totalling less than $25.00, although it may choose to.

Where the money goes if no one acts

If nobody claims the money and the brokerage has made reasonable efforts to find the person entitled, it goes to RECO. Small balances under $25.00 are the exception.

What to do next

• Find your Agreement of Purchase and Sale and any amendments, waivers or termination documents.
• Ask the brokerage in writing where the deposit is held and what it needs to release it.
• Talk with the other side about a signed release or direction.
• Keep your current contact details with the brokerage so it can reach you.
• If you cannot agree, speak with a lawyer about a court direction.

Acting sooner is generally better than waiting out the two-year point, since a signed release or court direction is the usual way the money is paid out.

Frequently asked questions